Dollar near one-week top amid rise in yields, caution before ECB

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TOKYO — The dollar hovered near a one-week

peak on Wednesday against major peers, buoyed by higher Treasury

yields and a weaker euro amid caution before a European Central

Bank policy decision.

The dollar index, which measures the currency against

six rivals, was little changed at 92.553, just below Tuesday’s

high of 92.571, a level not seen since Sept. 1.

The euro was almost flat at $1.18430 after dipping

to $1.18375 in the previous session for the first time since

Sept. 2.

The greenback maintained its biggest gain in a month versus

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Japan’s currency from overnight, trading little changed at

110.28 yen after being lifted by higher U.S. yields.

The benchmark 10-year Treasury note rose as high

as 1.385% on Tuesday for the first time since mid-July, a climb

of almost 6 basis points from Friday’s close. Monday was a U.S.

holiday.

The dollar index had tumbled to its lowest levels since

early August at the end of last week, when a surprisingly soft

U.S. payrolls report prompted speculation the Federal Reserve

will forgo announcing a taper of stimulus at a policy meeting

this month.

The U.S. central bank may also have reason to pause with

COVID-19 deaths surging in the country. Reuters data shows that

more than 20,800 people died from the virus in the past two

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weeks, up about two thirds from the prior period. President Joe

Biden will outline a plan to tackle the highly contagious Delta

variant on Thursday.

“Risk aversion in the air alongside the move up in UST

yields have helped the USD extend its post-payrolls recovery,”

Rodrigo Catril, a senior foreign-exchange strategist at National

Australia Bank, wrote in a client note.

“Investors are wary of the ECB meeting on Thursday,

anticipating a potential trim to the PEPP (Pandemic Emergency

Purchase Programme) bond-buying pace.”

Analysts polled by Reuters see PEPP purchases falling

possibly as low as 60 billion euros a month from the current 80

billion, before a further fall early next year and the scheme’s

end in March.

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Elsewhere, the Reserve Bank of Australia’s decision on

Tuesday to forge ahead with a taper of bond purchases while

adding the dovish concession of extending the program to

February, helped undermine the Aussie dollar, which was

little changed at $0.73885 on Wednesday, maintaining the

previous session’s 0.7% slide.

New Zealand’s kiwi also suffered overnight, trading

little changed at $0.7107 following an almost 0.5% decline.

Canada’s loonie was mostly flat at C$1.26415 per

greenback after tumbling about 0.9% overnight.

Lower oil prices weighed, while investors anticipate a

dovish narrative from the Bank of Canada’s policy meeting later

Wednesday following an unexpected economic contraction last

quarter, NAB’s Catril said.

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Meanwhile, cryptocurrencies struggled on Wednesday to

rebound from hefty losses suffered overnight, when several

trading platforms saying they experienced performance issues,

although it was not clear if these were a contributor to, or a

result of, the volatility.

Bitcoin traded around $47,000 after sinking as

low as $42,900.01 on Tuesday. Earlier that day it had touched an

almost four-month high of $52,956.47.

========================================================

Currency bid prices at 0050 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar $1.1847 $1.1842 +0.04% -3.04% +1.1847 +1.1841

Dollar/Yen 110.2700 110.2850 -0.01% +6.76% +110.3300 +110.2700

Euro/Yen

Dollar/Swiss 0.9191 0.9196 -0.04% +3.90% +0.9197 +0.9192

Sterling/Dollar 1.3786 1.3783 +0.01% +0.89% +1.3786 +1.3776

Dollar/Canadian 1.2637 1.2648 -0.06% -0.74% +1.2651 +1.2640

Aussie/Dollar 0.7393 0.7389 +0.06% -3.89% +0.7395 +0.7384

NZ 0.7110 0.7100 +0.17% -0.96% +0.7113 +0.7096

Dollar/Dollar

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

(Reporting by Kevin Buckland

Editing by Shri Navaratnam)

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